Industry News

‘Simplified’ energy tariffs still too confusing

A new Which? energy investigation has revealed that while Ofgem’s new rules for standardised tariffs are a step in the right direction, the majority of people still find them confusing as two thirds fail to identify the cheapest deal.

Which? found that only a third (35%) of people picked the cheapest deal when tariffs were presented in line with Ofgem’s new Retail Market Review (RMR) structure, made up of a unit rate and standing charge. Of the rest, three in ten (31%) picked the wrong tariff and a third (34%) either didn’t think it was possible to calculate or didn’t know how to. Four in ten (41%) used an aid to do their calculations such as a calculator or spreadsheet, yet only 50% of these people got it right.

Which? ran a similar test in 2012 only 8% could pick the cheapest deal using the old-style energy tariffs, so while the RMR structure is an improvement these latest results show that the majority of people are still baffled.

Alongside the RMR structure, Ofgem is bringing in a new system of presenting energy tariffs called the Tariff Comparison Rate (TCR). This displays tariffs based on what a medium energy user would pay for their gas and electricity only, for low and high users it’s intended to prompt the hunt for cheaper deals.

The research reveals that only 8% found the TCR display easy to understand. When people were asked to pick the cheapest deal for a very low-energy user nearly two thirds (64%) chose the supplier with the lowest TCR figure. However this would not have provided the cheapest deal for a very low user as there is no way of working that out using the TCR.

We are concerned that as TCRs are likely to appear in advertising and on comparison sites, some consumers could end up worse off by incorrectly using them to compare and decide on a new tariff.

Which? has launched the Fix the Big Six campaign, calling on the Government, Ofgem, competition authorities and the energy companies to drive forward radical reforms to fix the broken market. Which? want to see an energy market people can trust, where they have the power to spot the best deal for them using simple, easy to compare pricing.

“More radical changes are needed to fix the broken energy market. That’s why our Fix the Big Six campaign is also calling for a full competition inquiry, so that hard-pressed consumers can be confident that the market works well for them as well as shareholders, and that the price they pay is fair.”

Eight in ten (81%) picked the cheapest deal when they were presented with the tariffs in the simple pricing format of a unit rate and no standing charge that Which? has championed. Less than one in ten (8%) picked the wrong tariff and 10% didn’t think it was possible to calculate or didn’t know how to.